National General Supply, Inc., B-292696, November 3, 2003

B-292696 Nov 03, 2003 Jump To VIEW DECISION RELATED PAGES GAO CONTACTS Highlights DIGEST Protest that solicitation improperly fails to prohibit contractor from providing the agency with products from the contractor's own inventory or catalog is denied. Since such a prohibition is not required by law or regulation. The contractor is required to provide items through an electronic catalog. 400 hardware items the agency will purchase on a regular basis. These are non-priced items (NPI) for which the contractor will be paid on a cost reimbursement basis. The RFP includes a "plug" number for these items that will be used to evaluate all proposals. /1/ CLIN 0003 calls for a fixed monthly fee to operate the store. The price evaluation is to be based on the sum of the CLINs for the base and 4 option years. View Decision National General Supply, Inc., B-292696, November 3, 2003 DIGEST Attorneys DECISION National General Supply, Inc. protests the terms of request for proposals (RFP) No. F04666-03-R-0026, issued by the Department of the Air Force for a contractor-operated civil engineering supply store (COCESS). National maintains that the solicitation improperly allows the contractor to provide supply items that it obtained from its own inventory or catalogs, which allegedly provides large businesses a pricing advantage not available to small businesses that do not maintain an inventory or catalogs. We deny the protest. The solicitation calls for the contractor to run a COCESS to provide the agency with building materials and tools for maintenance and improvement projects. In addition to the inventory held at the store, the contractor is required to provide items through an electronic catalog. Contract line item number (CLIN) 0001 calls for fixed prices for approximately 1,400 hardware items the agency will purchase on a regular basis. CLIN 0002 concerns hardware items used less often, such as special tools. These are non-priced items (NPI) for which the contractor will be paid on a cost reimbursement basis. The RFP includes a "plug" number for these items that will be used to evaluate all proposals. /1/ CLIN 0003 calls for a fixed monthly fee to operate the store. This fee covers the contractor's costs of operation, including direct labor, overhead and profit. The solicitation provides for a "best value" award based on an evaluation of mission capability, past performance and price. The price evaluation is to be based on the sum of the CLINs for the base and 4 option years. The solicitation, as issued, prohibited the contractor from transferring items between affiliates and subsidiaries in which the contractor has a financial interest. Statement of Work (SOW) Sec. 1.4.8.1.2. In response to a question as to whether this prohibition would prohibit contractors from "purchasing from themselves" (i.e., providing items from their own inventory), the Air Force responded that "[n]o, this paragraph does not prohibit a company such as Home Depot from selling a product off their shelf at a price that is available to the market." Pre-Proposal Conference Question No. 13. Responding to another question, the Air Force stated that catalogs need not be published by an independent, third party (i.e., sales may be made from the contractor's own catalogs), provided the catalogs contain competitive published price lists available to the general public. Pre-Proposal Conference Question No. 18. The gravamen of the protest concerns the prices that the contractor will be permitted to charge the government for goods provided under CLIN 0002 (those for which plug numbers are to be used in the calculation of offerors' prices). National protests that the solicitation should prohibit the contractor from supplying products from its own inventory or catalogs and then charging the government the off-the-shelf purchase prices, since allowing that would provide large companies an unfair competitive advantage over small businesses such as National that do not maintain large inventories or catalogs. Specifically, the protester reasons, a large company contractor furnishing an item from its inventory or its own catalogs in effect would be purchasing the item from itself; since profit is included in the off-the-shelf purchase price, reimbursement of the cost for the item--i.e., the purchase price--will include profit. This being the case, in preparing their proposals, large company offerors will be able to use the prospective profit on these items to subsidize--i.e., reduce the prices for--the other line items in the procurement.